Walmart

Founders · Sep 21

How Sam Walton Worked

Walton's first Walmart was 16,000 square feet, made a profit from day one, did $700,000 in year one and grew about 30% a year for 15 years. Its administrative cost was 2% of revenue, it spent $500 million on computers in 1979, and it forecast $230 million of 1975 sales and hit $236 million.

Tips

• Sam Walton won with one absurdly simple idea: buy cheap, sell low, every day▶ 0:35Walmart became the most successful retail empire of all time from this single idea.
• Sam Walton held firm principles but turned 180 degrees when a course failed▶ 37:30In 1979 Walmart spent $500 million on a computer system linking stores, warehouses and distribution centers.
• Sam Walton controlled expenses better than rivals and treated cost as his competitive advantage▶ 39:45Walmart ranked number one in its industry for the lowest ratio of expenses to sales.
• Sam Walton built Walmart in small towns that Kmart thought unworthy of a store▶ 19:35Walton said that had Kmart jumped on them early, he hated to think what would have happened.
• Sam Walton's franchisor rejected the Walmart idea and he kept studying Kmart himself▶ 24:35Walton proceeded on his own, opening the first Walmart, which was profitable from day one.
• Sam Walton wandered stores and docks, practicing management by walking around▶ 38:20A customer's daughter complained about a refund, and Walton had the manager hold up the shorts at the Saturday meeting.
• Sam Walton pushed customer satisfaction above everything, down to free socks with a returned shoe▶ 30:55
• Sam Walton kept Walmart headquartered in Bentonville and let the world come to him▶ 31:35
• Sam Walton beat small-town merchants first, then bigger rivals, with a more efficient system▶ 32:55Walmart was 26 times the size of rival Jamesway yet had profit margins three times as high and nearly twice the sales per square foot ($210).
• Sam Walton forecast 230 million in 1975 sales to insurers and hit 236 million▶ 35:451975 sales came to 236 million.
• Sam Walton moved fast through acquisitions once he knew the format worked▶ 42:10At 48 he had just 4 Walmarts and 18 Ben Franklin stores; sales rose from 167 million to 478 million in 1974 to 1977.
• Sam Walton recruited relentlessly and ran through executives hard▶ 27:00Glass said Walton never became comfortable with who he was or how the company was doing.

Acquired · Jul 18

Walmart

Sam Walton built it on price cuts, direct sourcing, in-house distribution and a private satellite network, growing about 40% a year in the 1970s. It does nearly $600 billion in sales with a 4% operating margin, and growth has been near 3% since 2013.

Tips

• Sam Walton had every manager look for what rivals did right and copy it▶ 38:07He opened Walton's Five and Dime in 1950 as the third self-service variety store in the country, and sales hit $90,000 in year one against $32,000 the year before.
• Sam Walton cut prices on everything because lower prices sold enough extra volume to earn more profit▶ 44:30Walmart's gross margin today is about 24%, against the roughly 33% every store earned before discounting.
• Walmart built its own distribution network and beat Kmart, which borrowed its parent's▶ 1:31:00By 1990 Walmart passed Sears as America's largest retailer, and Kmart went bankrupt in 2002 and again after merging with Sears.
• Sam Walton said being under-capitalized forced the efficiency that made Walmart win▶ 1:32:40
• Butler Brothers refused to partner with Sam Walton on discounting, and he built it himself▶ 1:19:10The first Walmart did $1 million in sales in its first year.
• Sam Walton refused to buy suppliers' inefficiency and negotiated hard for every price▶ 1:16:15
• Sam Walton drove to manufacturers with a pickup truck to cut out Butler Brothers' markup▶ 41:20By year five his Newport store did $250,000 in sales and $30,000 to $40,000 in profit, a 24% operating margin, even with a 5% rent.
• Sam Walton gave managers equity in their own stores and let them invest in the others▶ 1:01:05Some hourly associates made millions of dollars from the stock purchase plan in the 70s and 80s, and Home Depot modeled its own plan on it.
• Sam Walton signed a Newport lease without checking why the seller wanted out and lost the store▶ 35:15The landlord paid him $50,000 for the franchise and assets, against $30,000 to $40,000 in annual profit.
• Helen Walton vetoed a St. Louis department store and set the small-town, family-only strategy▶ 29:05
• The Waltons kept ownership in a family partnership so no raider could take Walmart▶ 26:00Walton Enterprises owns about 36% of Walmart today, and the family owns just over 50% in total.
• Sam Walton used weekly Saturday meetings to share store numbers and spread what worked fast▶ 1:27:20
• Sam Walton stayed open to computers without trusting his own judgment, and hired people who did▶ 1:44:00A retail industry head said Walton could not have built his empire without the computer, and Walton agreed he was probably right.
• Sam Walton built infrastructure in house because it was core, adding a caveat to the beer rule▶ 1:36:00
• Sam Walton launched Hypermart USA too early, and Walmart Supercenters later made grocery over half of revenue▶ 1:54:30Grocery was 55% of Walmart's latest revenue, over $300 billion.
• Walmart's DNA of seeing opportunities made it slow to treat the internet as a threat▶ 2:02:50E-commerce is about $75 billion, roughly a fifth of Amazon's scale.

David Senra · Apr 12

Evan Spiegel, Snapchat: Building a Multi-Billion Dollar Company

Walmart's Friday meeting, In It to Win It, has leaders raise problems so they are fixed company-wide instead of store by store. Spiegel copied it for his Monday Specs risk review.

Tips

• Spiegel built weekly rituals so problems reach him early, borrowing Walmart's meeting▶ 1:35:02Walmart found leaders were solving problems locally but not for the whole company until the meeting existed.

David Senra · Jan 4

John Mackey: The Dropout Who Changed How America Eats

Its push into food so disrupted supermarkets that rivals thought only about beating it on price. That distraction left Whole Foods free to grow on quality and service.

Tips

• Whole Foods competed on quality and service while supermarkets fought Walmart on price▶ 22:28Whole Foods ran 20 to 25 years, from the late 1970s until the 2004 Columbus Circle opening, with almost no attention from supermarkets.
• John Mackey grew Whole Foods while rivals were hypnotized by Walmart and ignored a differentiated niche▶ 24:10Shoppers sometimes drove 100 miles and spent $300 to $400 on a weekend stock-up trip.

Lenny's Podcast · Nov 9

$1M to $10M: The enterprise sales playbook with Jen Abel

Landing it lets Jen tell the industry she works with Walmart. Three users at small business pricing would be easy to sell, hard to grow, and end up on a credit card.

Tips

• Never price an enterprise customer like a small business account▶ 21:25A buyer who paid $9,000 last year will ask what the 10x value is when you ask for $90,000, which is very hard to prove.
• Go after tier-one logos first, not last▶ 8:32Landing a tier-one logo gives referenceability, investor excitement and talent, and the best executives sit at these companies.

Acquired · Oct 26

Trader Joe’s: Hawaiian shirts and counter positioning

Its Great Value house brand is a cheaper copy of name brands, unlike Trader Joe's one-of-one private label. It trades at 1.3x revenue and its stores run about 150,000 square feet.

Founders · Dec 17

Amancio Ortega: The Genius Behind The Inditex Group

In 1979 Walton resisted a computerized inventory system for months, then approved $500 million after executives showed it would raise productivity. Ortega is compared to him for applying cutting-edge technology to an old industry.

Tips

• Ortega computerized his company in 1974, before the first Zara store existed▶ 15:45Zara now receives daily information about what is happening in all of its stores worldwide.

Lenny's Podcast · Jul 25

5 essential questions to craft a winning strategy | Roger Martin (author, advisor, speaker)

It did nothing online for about 10 years because it had 5,000 stores to protect, which gave Amazon scale and network effects.

Tips

• Move early on customer-driven shifts instead of defending your current profit engine▶ 1:06:58Microsoft's share of smart-screen minutes fell as phones took over, with 0.4% of smartphone operating systems and about 4% of tablets.

Founders · Mar 22

Sol Price: The Founder Who Taught Jim Sinegal, Sam Walton, Jeff Bezos, and Bernie Marcus

Walmart, Target and Kmart were running better operations than Fedmart after almost 20 years. Walton said he stole more ideas from Price than anyone, and being underfinanced pushed Walmart into small towns.

Tips

• Sol Price sold 64% of Fedmart to Hugo Mann and was pushed out▶ 42:42Mann took 64% of Fedmart, and Price lost control and was removed.
• Sol Price started with ignorance of retail and treated it as an advantage▶ 21:43Fedmart opened to an immediate and spectacular success, doing three times its projected first year sales.

Lenny's Podcast · Mar 10

Product management theater | Marty Cagan (Silicon Valley Product Group)

Cagan's first visit to Walmart's headquarters was a wake-up call about how differently most of the world works. It inspired him to found Silicon Valley Product Group.

Acquired · Aug 21

Costco

Carries 100,000 or more SKUs, turns inventory 8 times a year and marks up about 25%. Its revenue is about $620 billion, and it pays $19.50 an hour with about 20% attrition in typical retail.

App Masters · Feb 2

What is Marketing Mix Modeling (MMM)

Cited as an example where TV and podcast ads were hard to track, because listeners often just search for the app afterwards and the ad never gets credit.

Tips

• Include offline and brand channels like TV and podcasts in measurement▶ 9:54Steve cited running TV and podcast ads at Walmart.com, where tracking was hard because people just searched afterwards.

Acquired · Nov 15

Qualcomm

Spent tens of millions of dollars on a private satellite network, Linkabit's first commercial project, and was an early Omnitracs customer.

Acquired · Aug 16

Amazon.com

Bezos copied its habit of owning distribution and poached its tech lead Rick Dalzell and about a dozen executives. Walmart sued over trade secrets, and the case settled with no damages.

Tips

• Bezos recruited Walmart's logistics chief Rick Dalzell to build Amazon's native fulfillment moat▶ 2:00:15Walmart sued over trade secrets, the case settled with no damages, and Amazon today has 185 fulfillment centers and 96 airplanes.
• Amazon's fulfillment network is the moat that Barnes & Noble and eBay could not copy▶ 1:29:42Brad Stone's account says the Riggios would not put their best people on an effort that cannibalized profitable stores.
• Bezos copied rivals and fought a competitor head-on when it mattered▶ 4:06:26Sinegal himself said some of his best Costcos sit across the parking lot from a Sam's Club.